An investigation into New Jersey’s tax incentive programs has cast a shadow on their integrity, especially in places like Camden where alleged sweetheart deals could have serious fallout and damage the state’s reputation. Now, with the some of the state’s major political powers at odds, a collaborative solution remains uncertain.

by Liz Hunter and Julie Shannon

When amendments to New Jersey’s Grow NJ and Economic Redevelopment Growth Program passed in 2013, there were mostly praises all around, especially for its attention to encouraging business creation in areas like Newark and Camden. It was the shot in the arm these cities needed to compete with suburban towns that had been the preferred choice for businesses to call home. Camden in particular has benefitted from the tax incentive program, much of which has been credited to George Norcross. Even former Gov. Chris Christie recognized Norcross last year for the “rebirth of Camden.”

Fast forward to present time, and Gov. Phil Murphy—a Democrat—has cried foul. Following damaging findings from a task force he appointed, Murphy finds himself going up against South Jersey’s Democrats, while the publicity and lack of new economic incentives create a ripple effect for the business climate in South Jersey.

The Task Force

While some have questioned that it was political ulterior motives that spurred Murphy’s task force investigation, it was an audit by the comptroller’s office that first brought to light the “deficiencies with [the Economic Development Authority’s] management and administration of the incentive programs.” This led to insufficient oversight of recipients’ compliance with their award agreements, such as job creation. In some cases, the comptroller’s report states, the inadequate oversight resulted in overstated incentive awards. And when the EDA failed to assess projects for actual (versus proposed) job creation, that meant incentives were never adjusted.

The findings spurred the creation of a task force by Murphy to account for the $11 billion in tax break awards. “The task force and its work has never been about politics, nor has it been about one region or one company or one person,” says Darryl Isherwood, senior advisor, economic development communications for the office of Gov. Murphy. “It is about ensuring that every dollar of taxpayer money is well-spent and accounted for. The task force is an independent body that is following the investigation of the tax incentive programs wherever it leads.”

It wasn’t long before the task force began to inquire for additional information pertaining to companies that applied for tax incentives under the 2013 Grow NJ amendments (Economic Opportunity Act), specifically in Camden, and they all had a common connection: George Norcross. The task force found that members of South Jersey law firm Parker McCay, of which Norcross’ brother Philip is a shareholder, helped craft language for the amendments, language that in turn was “favorable to the firm’s clients.”

Norcross, along with Parker McCay and Cooper University Health Care, sued—unsuccessfully—to prevent the report’s release publicly, saying in a statement that the injunction was filed to allow companies due process to present facts about their applications. But once the report was public, major organizations—many of which have been lauded for their contributions to Camden’s resurgence—were named among those containing errors or misleading information on their applications, including Conner Strong & Buckelew, Holtec International, NFI, The Michaels Organization, and Cooper Health System, many of which have connections to Norcross or Parker McCay.

The task force’s scrutiny revealed that Holtec had been temporarily banned from doing business with the federally owned Tennessee Valley Authority, despite claiming otherwise on its Grow NJ application, a fact that would have disqualified the company from its $260 million award. The task force also reported Conner Strong & Buckelew, The Michaels Organization and NFI had committed to moving to Camden a year before applying for Grow NJ credits, even though they stated interest in relocating to Pennsylvania in their applications—information the task force says may not have equated to a denial of their awards, but at least would have reduced them by over $70 million.

No due diligence was paid to Cooper’s claim of considering out-of-state relocation either, according to the report, which would have reduced its Grow NJ award from the $40 million it received to approximately $7 million.

Parker McCay’s involvement in the draft language for the Grow NJ amendments “phantom tax” also proved to be an advantage for several of its clients, including Conner Strong & Buckelew, American Water, Holtec, the Philadelphia 76ers, Subaru of America and The Michaels Organization, all of which the EDA’s former president and chief operating officer testified on the law firm’s connection to.

The task force requested companies to resubmit applications that would confirm their compliance with the law and has referred a number of applicants for suspension or termination of their tax incentive awards, some of which have been voluntarily terminated, to the tune of $500 million.

The Impact of Tax Incentives

During the July 9 public hearing on the task force’s report, Julia Sass Rubin, a professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, spoke of her own volition. For 20 years she has been researching developmental finance and the effectiveness of tax incentives for economic development.

Her testimony, which addressed the ineffectiveness of tax incentive programs like the ones offered by the EDA, ended with a statement calling for further investigation by the task force. “As both an academic who studies economic development and a New Jersey taxpayer, I am appalled that our state has committed $11 billion to such an overpriced, inefficient, ineffective and opaque endeavor and strongly urge this task force to continue its work in the hope that these programs can be both dramatically reduced in scope and improved in their impact for the people of our state,” she testified.

Certainly New Jersey isn’t the only state using incentives like this to lure businesses, but according to data from Good Jobs First, a nonprofit, non-partisan research organization that tracks subsidies nationwide, the Christie administration granted more nine-figure subsidy packages than any other governor.

Speaking with South Jersey Magazine just days after the public hearing, Rubin says, “The use of these programs in states is prevalent. We’re not alone, but NJ has spent the fifth-highest amount in the data system [from Good Jobs First]—$11 billion, and that was before the amendments in 2013. It has shot up since then. We’re the fifth-highest tax abating state. Pennsylvania, in comparison, has spent $5 billion, but they are 1.5 times the size. It puts into perspective how out of control NJ has become.”

Rubin highlights what she sees as inherent issues in these programs. First is the emphasis businesses put on tax breaks in determining where to locate. “The idea of using tax incentives to determine your location is fundamentally problematic,” she says. “Decisions should be based on other factors. Is there access to transportation? Will management want to live there? Are the schools good? Is there a trained workforce? If you’re not making decisions based on that, then you won’t be successful in business.”

Next is how the company plans to improve the community. The 2013 Grow NJ amendments added incentives for cities like Camden and Newark, but didn’t include language requiring local hires. Additionally, the EOA left an opening for companies to claim property tax abatements for 10 years, increasing the fiscal strain on a city like Camden.

“We should be requiring companies to build in community benefit agreements where the community is at the table the entire time. Camden is a perfect example. Currently, there’s no requirement to hire locally, but the whole point is to create jobs in high poverty areas. What you have instead are companies moving a few miles, bringing their workforce, driving into a gated area to work for the day and then leaving to go home. How does that help Camden?” says Rubin.

She’s also a proponent for eliminating a requirement showing that companies are looking at locations in another state. “That’s useless and very easy to fake,” says Rubin. Instead, she says New Jersey should look to what’s happening in Missouri and Kansas where they are considering a cease-fire on fighting for jobs across state lines.

New Jersey is in fact competing with its neighbors, says Christina Renna, senior vice president, Chamber of Commerce Southern New Jersey. Both the Grow NJ and ERG tax incentive programs expired as of June 30 and while applications received up until the cut-off are still eligible to be approved, New Jersey may already be losing business.

“Programs like Pennsylvania’s ‘Keystone Opportunity Zone’ and Delaware’s low cost of living and favorable business tax climate make the fight to attract and retain businesses in our region all the more difficult. The Grow NJ program helped make our region competitive, created jobs and an economic environment that spurred new non-incentivized development,” says Renna.

The coverage surrounding the EDA investigation and the political infighting hasn’t helped either. “Unfortunately, we have already seen two Pennsylvania-based businesses walk away from relocating in South Jersey over the past several months,” she continues. “One of those companies specifically cited the ‘political climate’ as being a reason for their reconsideration.”

It’s not only damaging the confidence of perspective business owners, but those already established in South Jersey, she adds. “What we hear from our members is that the South Jersey business community’s trust in the tax incentive programs, which took years to develop, has been broken because of the recent negative coverage. That is not to say ‘bad actors’ should not be held accountable; it simply means the rhetoric needs to be more measured as to not paint all incentive recipients unfairly with the same broad brush,” says Renna.

While all of the focus seems to be on Camden, tax incentives have benefited various places in South Jersey. Renna names Atlantic City, which has diversified with Stockton University and South Jersey Gas both relocating. “Additionally, the Vineland area has benefited from the tax incentive programs with several food processing companies, among others, targeting that area for growth. Both of these towns in South Jersey are in desperate need of jobs and economic growth—and they came as result of the Grow NJ program.”

The governor has made it clear that tax incentives will not be the only tool for economic development moving forward. “The governor has proposed a robust tax incentive plan that responds to the shortcomings of the current program as well as the realities of our economy,” says Isherwood. “We are still hopeful that program will be passed by the legislature. The governor believes tax credits are a necessary tool in the economic development tool box, but they are not the only tool. Businesses choose New Jersey for a variety of reasons including our education and health care systems, our diverse and well-educated workforce, our location and our transportation options. We believe the governor’s proposed incentive plan will put New Jersey on the right course to grow and retain businesses in the state and will work for all residents.”

Murphy has announced broad plans for a suite of new programs from the EDA, including NJ Ignite, a rent assistance program for startups interested in incubators and shared working spaces. NJ Forward will create jobs in industries with high wages and experiencing rapid growth by incentivizing local hiring practices or partnering with a research university. NJ Aspire aims to turn vacant or underutilized properties into housing or business hubs, and will have a focus on workforce development. There are also plans for Brownfields Redevelopment and Historic Preservation Tax Credits, along with the New Jersey Innovation Evergreen Fund, designed to bring more venture capital investment. NJIEF will make approximately $500 million in venture capital funds available.

Yet, until these programs are officially in place, New Jersey’s lack of a tax incentive program poses a risk for the business climate.

“When you don’t have that mechanism to offset the high cost of doing business, that makes New Jersey a non-starter for many companies who might be determining where to set up their operations,” says Andrew Musick, vice president of government affairs at New Jersey Business & Industry Association (NJBIA).

More details are needed to truly evaluate whether Murphy’s proposals will successfully replace an incentive like Grow NJ. “We look forward to reviewing the proposals once all of the details are released. We do have concerns with how caps on a proposed project may limit New Jersey’s competitiveness. But the proposals outlined by the governor include many of the same concepts that NJBIA has previously recommended,” says Musick. “These concepts include recommendations that reduce the overall amount of incentives as the economy dictates, concentrate incentives on new jobs, further increase the state’s ROI, strengthen program governance, expand access to small businesses, maintain the transferability and monetization of tax credits and encourage companies receiving an award to incorporate a workforce development component.”

A panel formed by state Senate President Steve Sweeney held its first meeting at the end of last month. The outcome was unreleased at press time, but the Senate Select Committee on Economic Growth Strategies was expected to hear testimony from several tax incentive program proponents.

What This Means for Camden

In a time when the city of Camden is putting itself back on the map as a world-class city that can compete for talent, the negative attention has put a sour taste in some people’s mouths. Although from the same political party, reports of unrest between Murphy and Sweeney—a lifelong friend of Norcross—are nothing new.

“All of the work being performed by the task force could have been performed internally by the state of New Jersey. The state employs hundreds of lawyers, accountants and controllers—all of whom could have conducted all of this work and saved taxpayers millions of dollars that have been spent so far,” Cappelli says. “I think it’s more about taking a shot at the South Jersey Democrat base and leaders.”

Cappelli says instead of punishing those companies in Camden, he suggests members of the task force come to Camden to see the improvements the city has made as a direct result of large companies relocating there. “A lot of these companies didn’t receive tax credits yet; some projects aren’t even done,” he says, speaking of the fact that only $400 million of the $11 billion in tax credits have been issued. “I invite them to come to Camden to visit with these companies and see firsthand the number of jobs created and the city residents who are working at many of these jobs.

“Obviously after decades of decline, it will take time for Camden to fully rebound. But in

the short-term, these companies have already employed over 800 city residents,

unemployment is at its lowest rate in decades and the poverty rate is beginning to decrease. It’s a very positive effect,” he continues.

“As mayor of Camden, my fear—as well as many others’ fear—is that the unpleasant conversations and microscope that’s over the city has brought any future development to a halt,” Camden Mayor Frank Moran says. “And I would venture to say probably statewide because folks don’t want their company involved in certain levels of scrutiny. I testified in front of the board and I implored them to come up with the right incentives, packages and offers that continue to market the city of Camden. I’m biased [toward] my city and will always be [biased toward] the city; it’s my obligation. I’m selfishly looking out for the better of my city and any economic program that can benefit Camden—short-term, mid-term and absolutely long-term.”

Although many companies in Camden have received criticism from residents and community organizations for their lack of contributions to the city, there are those who want to rise above it. Like Joe Balzano, CEO of EMR USA, and a Rutgers-Camden graduate.

After college, Balzano started working for Camden Iron Metal in 1995, which was acquired by EMR in 2006. A UK-based metal recycling company, EMR has operations in 16 states, and Balzano is CEO of the US division. Its three major facilities are located in Camden, Minnesota and Lousiana. When it came time to choose a central U.S. headquarters, EMR looked at several options, but the tax incentives and the development of Camden played a big part in the company’s final decision. “From my point of view, convincing the company ownership to relocate into Camden wouldn’t have been possible without what’s going on,” he says.

The company received $133 million in Grow NJ tax credits and now operates out of the Victor Talking Machine building downtown, and has constructed a barge dock in South Camden as well as an advanced recycling system facility. “We’ve completed everything in our EDA application but we have plans to spend more beyond that application award,” he says.

Balzano is proud to say he has hired close to 200 Camden residents, something that wasn’t promised as part of the tax credits. “Beyond the tax grant, it’s important to us to hire local. I grew up here and have an affinity toward Camden and its residents. Everybody needs an opportunity and if we can provide one, I think it’s something we should strive to do,” he says.

As for the not-so-good publicity surrounding Camden and Grow NJ, Balzano says he feels far removed from it. “I hope we’re not reflected [in that negative attention]. We’ve tried to go out of our way to embrace the city and worked with the mayor and the city’s office to bring people in, like second chance groups. That’s what this program was designed to do and I hope we’ve exemplified it. I hope our record speaks for itself.”

Others may not see it, but a lot of good has been happening in Camden, he continues. “There is a renaissance in the city. I’ve been here 40-plus years— it’s noticeable. You can feel the change—from the schools, to the lowered crime rate. When I went to school here it was scary. Not anymore. Residents are also changing how they feel about the city. I speak to them all the time. Years ago, they just wanted to get out of Camden. I don’t hear that as much anymore and that’s encouraging,” Balzano says. “We look forward to continuing to grow here. We’ve been here a long time but now we’ve really dug our roots in.”

When asked what the next step would be for Camden, in spite of all the allegations, Cappelli says government officials aren’t going to back down.

“We are going to continue on fighting on behalf of the city and residents,” he says. “There’s a lot of momentum in the city; we are in the beginning of a renaissance and will make sure that renaissance will come to fruition. We hope [Murphy’s] administration decides to be a part of that renaissance rather than fight it.

“If there’s some wrongdoing, then that should be dealt with. But it’s amazing that out of over 900 tax credit applications that have been granted, only a few out of Camden are being looked at. … I’m hoping political peace can be made and we can all move forward together.”

“If 10 years from now Camden is in a better place, the state of New Jersey will absolutely be in a better place,” Moran states. “It’s a grand opportunity for leaders in Trenton to take credit for what’s happening in distressed cities like Camden. I’m hoping the governor can see this.”

*Parker McCay, George Norcross and Sen. Sweeney declined to comment for this story.